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17 Cards in this Set

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A23




Seriously Misleading Name Changes


-TF


-Impacts


9-507(c)

A seriously misleading name change creates a 4 month window.



If filer amends within 4 months, filing is valid for all collateral.




If filer does not amend within 4 months, filing is valid against collateral acquired before the end of 4 months.




If filer amends late, amendment is effective, Comment 4. But priority is only from the amendment.

A23




Change in Owner (debtor)


9-507(a)

“A filed financing statement remains effective with respect tocollateral that is sold . . . even if the secured party knowsof . . . the disposition.”




Comment 3. “[A]ny person seeking to determine whether adebtor owns collateral free of security interests must inquireas to the debtor’s source of title and, if circumstances seemto require it, search in the name of a former owner.”

A23




Changes in collateral: Physical/Use


9-507(b)

§9-507(b). A financing statement is not rendered ineffectiveif, after the financingstatement is filed, the information provided in the financing statementbecomes seriously misleading under Section 9-506.




The financing statementremains effective. The secured party maynot remain perfected.

A23




What are the three kinds of changes in collateral: Proceeds?

Type 0: The description still indicates the collateral (No Change). Rule: No change or re-filing to remain effective if the filed financingstatement covers the original collateral.



Type 1: The description is seriously misleading, but the filing is in the right office for the new collateral. Elephant Rule: it is seriously misleading, but same filing locationthen will not require a change to remain effective sometimes if notacquired with cash proceeds. Even if the change in circumstances has made the financingstatement seriously misleading, the financing statement remainseffective under 9-507(b). If acquired with cash proceeds then they have 20 days to perfect itor it becomes unperfected on the 21st day.




Type 2: The filing is in the wrong office for the new collateral. Rule: 9-507(b) excuses the misdescription, and the financing statementremains effective.


A23




Defrauding Secured Creditors

A person commits defraudingsecured creditors if the personknowingly destroys, removes, conceals, encumbers, converts,sells, obtains, transfers, controls or otherwise deals with property subjectto a security interest with the intent to hinder or prevent the enforcementof that interest.

A23




Type 0: Collateral Transformation Rule

Type 0: The description still indicates the collateral (No Change). Rule: No change or re-filing to remain effective if the filed financing statement covers the original collateral.

A23




Type 1: Collateral Transformation Rule

Type 1: The description is seriously misleading, but the filing is in the right office for the new collateral.




Elephant Rule: it is seriously misleading, but same filing location then will not require a change to remain effective sometimes if not acquired with cash proceeds.




Even if the change in circumstances has made the financing statement seriously misleading, the financing statement remains effective under 9-507(b).




If acquired with cash proceeds then they have 20 days to perfect it or it becomes unperfected on the 21st day.

A23




Type 2: Collateral Transformation Rule

Type 2: The filing is in the wrong office for the new collateral. Rule: 9-507(b) excuses the misdescription, and the financing statement remains effective.

A23




When does a security interest become unperfected in proceeds?

A security interest in proceeds is a perfected security interest if thesecurity interest in the original collateral was perfected. (9-315)


A perfected security interest in proceeds becomes unperfected on the 21stday after attachment unless:


A filed financing statement covers the original collateral! A security interest in the proceeds may perfect by filing that sameoffice, AND! The proceeds are not acquired with cash proceeds! The proceeds are identifiable cash proceeds; OR! The security interests in the proceeds is perfected…when thesecurity interest attached or within 20 days.

A23




Can a new debtor be bound without agreeing?


9-203(d)(2)

Under 9-203(d)(2): a person can be bound as a new debtor by a securityagreement without agreeing to it. The person is bound if the person assumes thedebts and acquires the assets of the old debtor.

A23




What is the impact of Corporate merger on debtor's obligations?

A corporation that acquires the original debtor corporation’s assets by merger andby operation of law becomes liable for the original debtor’s obligations, includingthe original debtor’s contractual obligations under security agreements.

A23




How is the transfer of collateral to a new debtor treated


9-508(c)

Treats the transfer of collateral to a new debtor the same as thetransfer of collateral to anyone else:


o A financing statement filed against the original debtor remains effectiveagainst the collateral under 9-507(a).


o If the new debtor’s name is different from the debtor’s name on thefinancing statement, 9-508(b) applies the rule: The financing statementremains effective with respect to collateral acquired by the new debtorwithin four months after the change, but is not effective with respect tocollateral acquired by the new debtor later.

A23




When is attachment necessary?

Attachment is necessary for perfection.

A23



When does security interest attach to collateral?


9-203(a)

A security interest attaches to collateral when it becomes enforceable.

A23




Attachment Enforceability Elements
9-203(b)

1. Value has been given (Value pre-existing claim or consideration sufficient to support a simple contract);


2. Debtor has rights in the collateral; and


3. Authenticated (to sign or execute a record- info stored in a medium that is retrievable) Security agreement that provides a description of the collateral (sufficient if it reasonably identifies what is collateral so that it is objectively determinable) OR the collateral is in the possession of a secured party.

A23




What does perfection require?

Perfection requires attachment and compliance with perfection requirements.

A23




Do you have to specify proceeds?


9-315(a)(2)

On sale, exchange, collection or other disposition of collateral a security interest continues in identifiable proceeds.